The Real Exchange Rate and Fiscal Policy During the Gold Standard PeriodEvidence from the United States and Great Britain

AbstractThe purpose of this paper is to examine the impacts of the real exchange rate, the government deficit and other relevant variables on aggregate output in Slovenia. Few of the previous studies have applied the AD/AS model to examine the impacts of major macroeconomic variables on aggregate output. This paper makes contributions to the literature by applying a rigorous model to examine how real GDP is affected by the real exchange rate, fiscal policy and other related variables. The exponential GARCH model is applied in empirical work. The paper finds that real depreciation of the Euro may affect Slovenia’s aggregate output positively or negatively and that more central government deficit as a percent of GDP does not affect aggregate output. In addition, Slovenia’s aggregate output is positively associated with the real stock price, the real oil price and real total labor cost or wage and is negatively influenced by the real lending rate and the expected inflation rate. Recent real depreciation of the Euro would help Slovenia’s aggregate output whereas expansionary fiscal policy would not be effective in stimulating the economy.

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Fiscal Policy, the Real Exchange Rate and Commodity Prices

IMF Working Papers ◽

10.5089/9781451851434.001 ◽

1990 ◽

Vol 90 (91) ◽

pp. 1

Author(s):

Carmen Reinhart ◽

Keyword(s):

Exchange Rate ◽

Fiscal Policy ◽

Real Exchange Rate ◽

Commodity Prices ◽

The Real

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The Self-Inflicted Wounds

Money ◽

10.23943/princeton/9780691171661.003.0013 ◽

2017 ◽

Author(s):

John Kenneth Galbraith ◽

James K. Galbraith

Keyword(s):

United States ◽

Exchange Rate ◽

Stock Market ◽

Federal Reserve ◽

Gold Standard ◽

The United States ◽

The Self ◽

Gold Content ◽

Negative Consequences ◽

Stock Market Crash

This chapter examines the negative consequences of Britain's return to the gold standard in 1925 and the stock market speculation in the United States in the late 1920s. In Britain, as elsewhere, prices fell in 1920 and 1921 as the wartime shortages were overcome, the budget was brought back under control, and the boom came to an end. Unemployment, which had been negligible in the preceding years, rose to 12.6 percent of the labor force in 1921. The chapter considers Winston Churchill's justification of Britain's decision to restore the pound to its prewar gold content of 123.27 grains of fine gold, its old exchange rate of $4.87, John Maynard Keynes's case against Churchill, and the stock market crash of October 1929 in the United States after the Federal Reserve Board had issued a warning against banks's use of Federal Reserve funds to finance speculation.

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